During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because
A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs.
B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward.
C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs.
D) Both answers A and C are correct.
B
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The economic way of thinking indicates that government action will
a. never improve on the allocation of resources through markets. b. always improve on the results of markets if the political process is democratic. c. reflect the actions of political decision-makers seeking to advance the public interest, rather than their own personal interests. d. can either improve the well-being of the general public, or harm it, depending on the circumstances.